Decision Making Models at Amazon: Operations Management Assignment
Here is a case study assignment sample on Amazon's operations management. The study is focused on the operational management of Amazon to understand e-commerce outlining and its potentiality to create business expansion for the business entity in the global marketplace. E-commerce outlining framework is the smartest business framework that creates cost-effectiveness for the product and services in regards to meet the satisfaction level of the potential customers (Bartneck et al. 2015). The following study provides a brief discussion on the struggles and success story of Amazon. The decision-making potentiality, operational management and other business approaches introduced by Amazon for being a market leader from a small book retailer have been highlighted in the study.
1. Amazon began as an online book retailer. How has it grown to be known as the "everything store"?
Story of Amazon: In the study of operational management, the success story of Amazon has been presented to understand the key approaches to build a successful platform for business. The story of Amazon is observed as one of the inspirational stories of entrepreneurship success stories in the online retail industry. The Amazon has been one of the leading online retail business entities which have catered all sorts of products and services required by the customers in the marketplace (Business Insider 2018). From being a small book retail shop, the Amazon has slowly created its platform and positioning in the market, the journey of Amazon to the success is an inspirational and motivational story. In today’s market, Amazon is positioned as a market leader in the online retail market, its cloud computing facilities and e-commerce facilities are worth $400 million. There are about 260000 employees operating and working under the Amazon umbrella (Amazon 2018). As per the management of the entity, the journey to the market leader has not been simple; there were several critical business decisions making, and risks have been taken by the entity which has fuelled its success positioning in the market.
CEO vision: According to the chief executive officer of Amazon, the online book store has been the perfect decision. This has helped to increase customer reliability over the brand, as quality products are introduced through online shops. The focus of the CEO of the entity has been to avail 85% of the products in different sections for the customers (Ford 2017). This has been the strategic decision making from the CEO of the entity which ha later materialised and considered as best decision making for the entity. With some sense of strategic application, Amazon introduced other electronic products cloud computing and groceries.
Research and Development team of Amazon: The extensive research has been another key success factor which has helped Amazon to create a leadership platform for its brand. In the year of 2015, Amazon has made spending of about $12.5 million on its research and development department to redefine the corporate trade secrets and business innovation (Garden and Profiles 2018). The extensive research and innovation have resulted in introducing of Amazon Prime web series, AI-based Alexa, Amazon Fresh, Prime Pantry, Prime Music, Prime now and some of the greatest technologically advanced services and innovations (Business Insider 2018). This innovation has helped the entity to meet its vision, mission and requirements. According to the statistics, with visits to customer’s online website of Amazon, the customers have to spend $1, within which $51 cents is gained by Amazon itself (Welch 2015). The introduction of diverse products and services might help the company to cover all the expected customer needs and requirements; this has originated a great opportunity for Amazon in the market.
Amazon Masterstrokes: The business entities face unexpected risks and opportunities that make them more focussed and organised for staying competitive in the marketplace. In the year 2014, Amazon has received a chance of making an investment in two significant ventures; one of them leads to failure, and another might bring success (Tollefson 2015). In 2014, Amazon made an investment in producing a Smartphone which has been equipped for integrating all the streaming, social media options for the customers in the market. However, the entity has been forced to stop the production after facing a loss of $180 million due to downfall in customer interests (Bouchard 2017). In a similar year, Amazon made an investment of $970 million for acquisition online social video game streaming business Twitch (Salam 2016). The investment has introduced video game producing a vision for Amazon, which has been successful.
Amazon’s supply chain: Supply chain management has applied a critical role in architecting the technological upgrades and innovation. In the past 20 years, Amazon has been able to generate a profit margin of $100 million due to its excellent and effective supply chain management (Supply Management 2018). The online delivery system of Amazon has been increased its efficiency of fast, and efficient delivery of the desired products; this has put extreme pressure on the market competitors. In the case of Amazon Prime services, the company has provided two days earlier delivery for its potential customers before it has been initially launched (Chiu et al. 2017). The increased customer delivery services have been considered a key part of the success story for Amazon. The company has introduced third-party logistics, outsourcing management of inventories, and logistics outsourcing which has added pace to the successful journey of the entity.
Drone delivery system: The Amazon Prime Air has been named to the delivery system introduced by the entity using drones. The drone delivery system will be possessed for delivering the ordered products within 10 miles for purchased products within 5 pounds (Welch 2015). The delivery time of drones will be estimated 30 minutes. Hence, the operational management and supply chain of Amazon has been trying to go any extent to increase its services and delivery system.
2. What aspects of Amazon's operations management are based on the increased globalisation of world trade?
Case analysis of Amazon: One of four leading technological business organisations in the global market Amazon is an online seller for different commercial products and services using its e-commerce platform. The business entity has introduced enough innovation and technologically advanced products, which has increased its sustainability business reputation in the marketplace (Strauss and Frost 2016). The supply chain management system introduced by Amazon includes a flawless set of activities, which increase the quality and efficiency of its services. For meeting any form of customer queries and issues, the supply chain management help team makes constant mentoring.
Global Viability of Amazon: In the year 2014, the global presence of Amazon has been downward. In a similar year, the sales performance of the entity in the domestic market that is Northern America has been analysed 25% rise. On the other hand, the sales performance of the entity in the global market reported a rise of 12% (Ritala et al. 2014). From this, it can be explained that Amazon has been weak in balance its global sales performance. In the emerging economies like India and China, Amazon might be able to gain some considerable sales and profit. In relation to extracting the global opportunities by Amazon, it might require to comprehend the dos and don’ts in its strategic business and market decisions.
Figure 1: International Revenue of Amazon
(Source: Bartneck et al. 2015)
International growth challenges of Amazon: The case analysis has suggested that Amazon has been able to raise its sales percentage higher in its domestic market and low in the global marketplace. The company enjoys a strong market share in the domestic market in comparison to the international market presence (De Massis et al. 2016). The performance of Amazon in the global marketplace is less in comparison to the Northern America sales figures. The supply chain management system of Amazon has equipped for close arena performance. Thus, in regards to getting proper access to the international market, it might require to restructure the supply chain and operational system of the entity (Grimmer et al. 2017). The discussed services of Amazon are primary depended on the retailers. Therefore it's difficult for the entity to move forward beyond its local market. Amazon has been focused on the limited group of scopes and land grabbing mentality, which has restricted the entity to make proper growth in the global marketplace.
3. Amazon’s marketplace focuses on smaller sellers and manufacturers by linking them with a huge customer base and fulfilment program. Can e-commerce ever truly replace the in-person shopping experience?
Compliance towards small-scale sellers with potential customers: The Amazon covers a huge marketplace with a variant of products and services, with an increasing number of the customer base. The shows highlighted through Amazon Prime are in huge demand within the customers and sellers in the market (Rossman 2016). The small-scale business entities operating in the market has limited scope and market reach. These entities even can use the Amazon services for the exhibition of their products and services (Leeflang et al. 2014). Hence, the small business entities have a scope of a clever move to be authorised under Amazon umbrella for suing is online portals, in which the Amazon uses FBA ad, third party models, for functioning and presentation of their products.
The FBA: The functioning of the FBA system of Amazon has helped the small business entities to manufacture their products rate them and exhibit them through the Amazon platform (Sciara et al. 2018). If an online seller has already a similar program introduced in the own website, they can opt-out from Amazon business fulfilment program.
Third-party business entities: The third-party sellers usually opt-out from their manufacturing and fulfilment services while there are connected with Amazon FBA practice. However, the third-party business entities include risks of cancellation of business deals if notations are not met (The Balance Small Business 2018). The aim of third-party sellers is to lead the orders they received. Thus, some of the workforces are focused on front end marketing for converting the leads to orders.
In-person shopping and e-commence: The decision making between offline and online shopping is crucial. However, better benefits, variety of options and reliable price range presented by online shopping has become favourable for the huge number of customers. In relation to understanding the advantages poured by online shopping, the paradoxical approach is required for making an effective conclusion (Shankar et al. 2016). The online shopping provided huge customer dimension and proved to be cost-effective that is easy to address for the entities. The customer’s convenience is respected by online shopping, as it provides anytime access to the desired product and includes an online delivery system for the preferred products (Salam 2016). However, online shopping reduces customer interaction and face to face conversation for the business, which includes huge investment to cover up. Additionally, the customers get to experience the physical appearance of the product, product look, performance and functioning from the offline shopping which is nascent in case of the online presence of the products (Fang et al. 2016). On the other hand, offline shopping are time inconvenient, as customers often visit the stores after visiting once for the purchase of a product.
From the discussion made above, it is difficult to make the right judgement on the online and offline shopping as they have equal advantages and disadvantages. However, time-saving, convent sopping, considering a busy life schedule, quick availability, fast payment for purchases, online shopping is mostly considered. Consequently, the retailers in the marketplace might require using Omni-channel strategic application for analysing customers changing preferences for online and offline shopping.
4. What are (or could be) the real long-term implications of the increased presence of Amazon to the Australian Retail Industry?
Australian retail industry and Amazon: The introduction of Amazon in Australia, there has been considerations about the engagement of online portals for different locations in the country. The opinions received from the market were unique and aggressive about introducing online portal for Amazon in Australia (Yang 2018). In an argument, it has been stated that the introduction of Amazon in Australia might make a huge impact on the local retailers in the marketplace. According to the financial review of Australia, Amazon has planned to adopt its strategy which s used in Spain for entering into Australian retail industry (Australian Financial Review 2020). Amazon has made the decision to include its inhouse retailing in the marketplace with the support of the third party business entities. The decision making has done mixed reviews from other business entities operating in the country. In relation to meet the competition, the small entities in the market have lowered down the prices of their products (O'Connor 2017). The market leaders like JB Hi-Fi or Myer might have been affected by the Amazon introduction, although there have been optimistic approach has been received from other business players (Babones 2017). However, the Amazon 3 hour’s delivery approach might not be effective in the country due to scattered customer base. Thus, the Amazon feasibility in the market of Australia has a mixed opinion from the market players,
The success journey of Amazon has helped to take the e-commerce business to the next level. Amazon has been able to build its market leadership due to its intelligence business decisions and innovative products and services. The study has concluded the key factors and strategic applications which has helped Amazon to build its huge platform in the domestic and global marketplace. Additionally, Amazon has become a bridge for the small business entities to approach their products to the huge customer base through the Amazon portal and FBA system. In the discussion, the introduction of Amazon in Australia might be tough, although its strategic applications might help the business to increase its global expansion.
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